Many investors and entrepreneurs are more concerned about preserving their estate for their children than they are about increased income or current income tax savings. They choose the lead trust as a means of sheltering their estate while also providing a gift to InterVarsity.

The lead trust holds appreciating assets, pays income to InterVarsity for a period of years, and then passes the remaining principal to beneficiaries selected by the donor (the principal can also be returned to the donor).

The value of the trust assets subject to gift and estate taxes is reduced by the present value of the income stream provided for InterVarsity. In addition, the taxable value of the lead trust's assets is fixed at the time the trust is established - any subsequent increase in the value of the assets is outside the donor's estate and thus free of gift or estate tax.

This combined reduction in the taxable value of the assets means that a donor's family can often receive more from an estate plan containing a lead trust than they could from an outright bequest from their parent.

Lead Trust vs. No Gift

Assumptions:

• Donor has, or plans to transfer the maximum allowable amount of assets to family, Gift and Estate Tax free. In 2003 couples can transfer a lifetime $2,000,000, and make additional annual gifts of $22,000 per person each year. A Charitable Lead Trust can expand this gifting potential even further.
• Donor places $500,000 of rapidly appreciating assets into a Lead Trust.
• Lead Trust will pay InterVarsity a 6% annuity for 20 years, then terminate and pay the appreciated asset balances to donor's children, Gift Tax free.
• Asset Total Return (income and capital growth) is projected at 8%. The Trust scenario payout of 6% leaves 2% for net appreciation. The No Gift scenario assumption is that all proceeds are reinvested after paying income taxes.

Comparison of benefits	6% Lead Trust	No Gift
Principal	$500,000	$500,000
6% Annuity For InterVarsity (20 Years)	$30,000 annually	-0-
Asset Value (including 5% Appreciation) Subject to Gift & Estate Tax in 2023 [1]	-0-	$1,770,175
Gift Tax Deduction - 2003	6% Lead Trust	No Gift
2003 Gift Tax Deduction = Present Value of 20 Year Annuity	$415,026	-0-
Asset Value Subject To Gift & Estate Tax In 2003	$84,974	-0-
Gift & Estate Tax In 2003 (Assume Rate of 49%)	$41,637	-0-
Benefits Summary - 2023	6% Lead Trust	No Gift
Total Distribution to Family [1]	$957,620	$902,789 (net of 49% tax)
Total Distributions For InterVarsity (2003-2023)	$600,000	-0-
Total Family and Ministry Benefits	$1,557,620	$902,789 (net of 49% tax)
[1] In 2003 the top Gift and Estate Tax Rate is 49%. Tax Rates are projected to decline steadily through 2009. In 2010 Estate Tax is scheduled for complete repeal, and the Gift Tax will be 35%. Gift and Estate tax can be reinstated, however, after 2010, due to a Sunset Clause in the current law.

Charitable Gift Annuities

Deferred Gift Annuities

Donor Advised Funds

Charitable Remainder Unitrusts

Charitable Remainder Annuity Trusts

Charitable Lead Trusts

InterVarsity Christian Fellowship/USA^® does not offer legal or tax advice for your gift plans, but we do strive to provide helpful educational information and also strive to work carefully with you and your advisors to help you to accomplish your charitable goals.